Correlation Between Imperial Brands and Brent Crude
Can any of the company-specific risk be diversified away by investing in both Imperial Brands and Brent Crude at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Imperial Brands and Brent Crude into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Imperial Brands PLC and Brent Crude Oil, you can compare the effects of market volatilities on Imperial Brands and Brent Crude and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Imperial Brands with a short position of Brent Crude. Check out your portfolio center. Please also check ongoing floating volatility patterns of Imperial Brands and Brent Crude.
Diversification Opportunities for Imperial Brands and Brent Crude
-0.27 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Imperial and Brent is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Imperial Brands PLC and Brent Crude Oil in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brent Crude Oil and Imperial Brands is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Imperial Brands PLC are associated (or correlated) with Brent Crude. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brent Crude Oil has no effect on the direction of Imperial Brands i.e., Imperial Brands and Brent Crude go up and down completely randomly.
Pair Corralation between Imperial Brands and Brent Crude
Assuming the 90 days horizon Imperial Brands PLC is expected to generate 0.86 times more return on investment than Brent Crude. However, Imperial Brands PLC is 1.16 times less risky than Brent Crude. It trades about 0.26 of its potential returns per unit of risk. Brent Crude Oil is currently generating about 0.05 per unit of risk. If you would invest 3,007 in Imperial Brands PLC on August 29, 2024 and sell it today you would earn a total of 243.00 from holding Imperial Brands PLC or generate 8.08% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Imperial Brands PLC vs. Brent Crude Oil
Performance |
| Timeline |
| Imperial Brands PLC |
| Brent Crude Oil |
Imperial Brands and Brent Crude Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Imperial Brands and Brent Crude
The main advantage of trading using opposite Imperial Brands and Brent Crude positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Imperial Brands position performs unexpectedly, Brent Crude can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Brent Crude will offset losses from the drop in Brent Crude's long position.| Imperial Brands vs. Japan Tobacco | Imperial Brands vs. British American Tobacco | Imperial Brands vs. Turning Point Brands | Imperial Brands vs. Universal |
| Brent Crude vs. Soybean Futures | Brent Crude vs. E Mini SP 500 | Brent Crude vs. 30 Year Treasury | Brent Crude vs. 2 Year T Note Futures |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the CEOs Directory module to screen CEOs from public companies around the world.
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